Growth in global research and development funding slowed in 2013from the pace of growth seen in 2011-2012. The 2013 slowdownwas due primarily to unsettled European and U.S. economies that,in turn, affected global performance. R&D investments often areclosely linked to GDP and economic outlook. Global R&D invest-ments, according to our analysis, are forecast to increase in 2014 and2015—albeit at a decreasing rate in 2015. Other highlights include:• Economic and R&D growth in Asian countries have slowed,but R&D investments in this region still outpace the rest ofthe world.

• U.S. R&D investment is back on track with modest growth
that is expected to continue through 2020.

• R&D rankings have not changed significantly in the past
five years, but differences have narrowed in funding levels
between countries.

Asia’s Role Continues to Increase

While 2013 R&D investment growth was minimal in the U.S. and
Europe, growth in most Asian countries—especially China—
continued. Asian R&D investment growth rates are expected to return
to their pre-2013 levels in 2014 and 2015. The exception to this
outlook may be Japan, which is more correlated with trends in the
U.S. and Europe than with neighboring Asian countries.

In 2014, China will continue its two-decade trajectory in R&D
investment, consistent with the current Five-Year Plan (FYP 2011 to
2015). According to our Forecast, China’s research intensity will increase to 1.95% of GDP in 2014. China’s FYP is aimed at achieving
2.2% of GDP by 2015. This rate of growth is expected to continue
through the end of the decade as China strives to transition from
a manufacturing economy to being “innovation-driven” by 2020.
At current rates of R&D investment and economic growth, China
could surpass the U.S. in total R&D spending by about 2022.

The ranking of the top ten R&D-spending countries has not
changed over the past five years, except for China surpassing Japan
for the number two position in 2011. These top ten countries spend
about 80% of the total $1.62 trillion invested in R&D around the
world; the combined investments by the U.S., China and Japan is
more than half of the total.

Outlook

The broad patterns of R&D spending are not expected to change
significantly in 2014, but regional shifts are occurring. Just five years
ago, the U.S., Canada and Mexico were responsible for nearly 40%
of global R&D. That share has dropped to about 34%, with the
U.S. shrinking from a 34% share in 2009 to 31% now. Europe has
experienced a similar decline from 26% in 2009 to less than 22% in
2014. Where the west has retrenched, Asia has advanced. In the
same five years, Asia’s share of R&D investments has risen from
33% to nearly 40%, with China rising from 10% to nearly 18%.
China’s high level of research intensity has now been sustained for
nearly 20 years, and its total R&D investments are now more than
60% those of the U.S. The economic and political context in each
of these regions suggest these trends are not likely to change in the
near term and are likely to continue through 2020.

The “Rest of the World” in this Forecast includes countries in Africa, the Middle East and Russia and the Confederation of